Computer software generally has a limited useful life and is considered to be of rapidly diminishing value. Accordingly, only major purchases of software valued at, or in excess of, $100,000 are capitalized as an asset.

In some instances, primarily where units utilize cost accounting to determine billing rates, capitalization will be permitted at lower dollar levels where the software has a useful life of at least three years and the value is not less than $5,000.

Where possible, implementation costs associated with the development of internally written software should be tracked and capitalized with the software in accordance with the limits set above. No tracking or capitalization of implementation cost is necessary, or encouraged, where the aggregate for the software will not exceed $100,000.

The accounts and related subclass used for software transactions are:
1635-00140 - Miscellaneous Equipment-Software
1790-00140 - Accumulated Amortization
8090-00140 - Amortization Expense
9150-00140 - Disposal Book Value

The accounting entries would be:

Capitalization
Dr. 1635-00140 - Miscellaneous Equipment-Software (Shown on Balance Sheet)
Cr. 6000-00140 - Software Purchases Expense Account (Shown on Budget/Expense Report)

Amortization
Dr. 8090-00140 - Amortization Expense (Shown on Budget/Expense Report)
Cr. 1790-00140 - Accumulated Amortization (Shown on Balance Sheet)

Disposal
Dr. 9150-00140 - Disposal Book Value (Shown on Budget/Expense Report)
Cr. 1635-00140 - Miscellaneous Equipment- Software (Shown on Balance Sheet)
Dr. 1790-00140 - Accumulated Amortization (Shown on Balance Sheet)
Cr. 9150-00140 - Disposal Book Value (Shown on Budget/Expense Report)